Government relaxes telecom mergers and acquisitions norms

NEW DELHI: The Telecom Commission has accepted industry regulator Trai's recommendations to relax rules for mergers and acquisitions in the sector and allow spectrum-sharing among telcos, paving the way for consolidation in the 14-player market.

The highest decision-making body of the communications ministry is also open to the regulator's proposal to levy a one-time fee on operators for holding spectrum beyond 6.2 mega hertz, telecom secretary R Chandrasekhar said after a marathon meeting late on Monday. Mergers and acquisitions will get automatic clearance if the combined market share of the new entity is less than 35% and spectrum holding is less than 25%.

When the market cap is more than 35% but less than 60%, the Telecom Regulatory Authority of India will examine the case to avoid monopoly in the market, Chandrasekhar said. Trai had last month suggested that M&As be allowed in the industry if the combined market share of the new entity is less than 60%. The move will pave the way for consolidation in the industry, where a number of new entrants are yet to make a mark despite millions of Indians start using mobile phones every month.

While this is good news for telcos, it is estimated that they may have to shell out more than Rs 17,500 crore as one-time fee on excess spectrum, based on Trai's recommendation of a fee of Rs 4,571.87 crore on each mega hertz beyond 6.2 MHz.

The commission favoured discovery of spectrum prices through auction for future allocation of airwaves.

It also fixed the annual revenue share at a uniform 8% for all telcos, against 6%-10% share depending on factors such as service and region. Chandrasekhar said this will be implemented in two phases over two years, but did not reveal details.

Telecom tower companies and internet service providers, who do not pay any annual licence fee now, too will now have to share 8% of their annual revenues.

Overall, the industry's annual pay out to the government will increase by several thousand crores.

The policy maker will finalise all other decisions within a week, Chandrasekhar said. The commission will send all these decisions to the Telecom Minister Kapil Sibal and subsequently it will see Cabinet's node to implement them.